By Denise A. Valdez, Reporter
AYALA LAND, Inc. (ALI) is removing P40 billion from its capital expenditures (capex) this year as it focuses funds on essential expenditures and critical projects while assessing the impact of the pandemic.
Chief Finance Officer Augusto Cesar D. Bengzon told ALI’s stockholders during the property company’s annual meeting on Wednesday that the 2020 capex had been reduced to P70 billion from the original estimate of P110 billion.
He also said ALI would not be launching new projects this year and is rationalizing potential investments and land acquisitions.
“We recognize that we may miss out on some opportunities, but we believe that this is the right decision to ensure that Ayala Land is in a healthy and strong financial position throughout this crisis, for however long it may persist,” Mr. Bengzon said in the meeting, which was held online.
“We believe that we have sufficient projects in our development pipeline to sell once the situation normalizes, given that we have launched P159 billion worth of projects last year,” he added.
The company allocated P2.6 billion in rent condonation for merchants covering the 1.5-month enhanced community quarantine (ECQ). Some P600 million has also been set aside for 78,000 “inorganic” employees. These are service providers, construction workers, and security and maintenance personnel.
President and Chief Executive Officer Bernard Vincent O. Dy noted ALI expects a “major impact” on its performance this year from the ongoing pandemic, with a “high likelihood” of a spillover next year.
“Many of our revenue generating businesses have been significantly affected by the ECQ,” he said.
The government imposed an ECQ over Luzon starting middle of March until end of April due to the rapid spread of the coronavirus disease 2019 (COVID-19). Major cities in Visayas and Mindanao have also observed regional ECQs.
Since then, ALI has closed all of its malls and resorts and some of its hotels and offices across the country. What remains operational are more than 90% of its office spaces and nine out of 11 of its hotels but on limited operations.
Despite these operational constraints, Mr. Bengzon said ALI’s net cash flow from its operations is “more than sufficient” to fund its adjusted capex and financing expenses. This would allow the company to reduce its outstanding debt without the need to raise new capital.
He noted ALI is targeting to issue a two-year bond in early June to pay down a portion of its outstanding debt obligations this year.
“With P18 billion in cash, unutilized credit lines of P25 billion, action plans in place for prudent cost monitoring and capital allocation, and conservative debt management, I believe our balance sheet will remain robust and enable us to weather the challenging environment…,” Mr. Bengzon said.
Once the ECQ is lifted, Mr. Dy said ALI plans to do a gradual reopening of its offices with a majority of its employees still working from home. Operating assets like malls and resorts will also prioritize social distancing and safety protocols.
“We are now in the process of adjusting our plans to ensure that we adapt quickly to this new reality and remain resilient throughout this crisis,” he said.
ALI booked a net income of P33.2 billion in 2019, up 13% year-on-year, due to higher contributions from new leasing formats. Its shares at the stock exchange shed 75 centavos or 2.42% to P30.30 apiece on Wednesday.